iPhone buyback firms unruffled by Apple's trade-in plans

Quote volumes climb as early adopters prep for next month's new iPhones

Buyback firms today remained unconcerned about a reported Apple in-store iPhone trade-in program, saying that if accurate, it simply vindicated their business models.

"Apple [doing buyback] would be great for our business," said Anthony Scarsella, chief gadget officer at Gazelle, in an interview. "It will only add a ton of awareness to the idea of re-commerce."

Jeff Trachsel, chief marketing officer at NextWorth, agreed. "This is more a validation of our business model than anything else," Trachsel said when asked about Apple's purported plans.

Gazelle and NextWorth are two players in "re-commerce," the buying of used consumer electronics like smartphones, primarily in developed countries, then refurbishing them for resale in less affluent markets.

Their sentiments were in line with comments by re-commerce companies in June, when news first circulated that Apple would this fall begin accepting older iPhones as trade-ins for new models. On Monday, those reports intensified, with TechCrunch saying that some Apple retail stores were already running pilot programs.

Scarsella and Trachsel contrasted their programs, and others like them, with what Apple is expected to offer. Gazelle and NextWorth pay cash for used smartphones, while Apple will only offer in-store credit in the form of an Apple gift card. Both Gazelle and NextWorth accept a wide range of devices, giving consumers who want to switch from an Android-based phone a sell-back outlet.

Scarsella was the most aggressive in downplaying the threat, noting that Apple's program required that customers visit a store. "I think this could be a nightmare," said Scarsella, referring to the lines that often form outside Apple stores at the launch of a new iPhone. "With us, it's fast and easy, and you wait until you get the new one before you send the old one back."

Both Gazelle and NextWorth offer a lock-in period, a span of X days during which they guarantee a quoted price for a trade-in. Usually, that's long enough for consumers to buy a new phone, switch their number and transfer their apps and content before shipping off the old smartphone.

On Monday, Gazelle extended its usual 30-day lock-in to 50 days, or until Oct. 15. NextWorth offers a 30-day lock-in period.

Apple is expected to unveil its new iPhones on Sept. 10 and begin selling them Sept. 20.

Talk of those dates has, as usual, boosted activity on re-commerce companies' websites as consumers decide whether to sell their older iPhones before purchase prices drop further.

NextWorth, one of several 're-commerce' companies, offers $340 for a 16GB iPhone 5 that works on AT&T's mobile network.

While NextWorth said its quote volume was similar to last year's, Gazelle said its was running triple that of 2012. "We're up 3X from last year for the period August 1 to August 25," said Scarsella. "We think this will be the biggest iPhone yet, as every year's model is. The increase in offers is already showing that."

In 2012, Apple introduced the iPhone 5 on Sept. 12 and kicked off sales Sept. 21, lining up this year's timetable with last year's.

Scarsella credited the rumors of an impending lower-priced iPhone, dubbed the iPhone 5C for the moment, with some of the pop in sell-back inquiries.

Trachsel of NextWorth said that his company's average quoted price had jumped recently as iPhone 5 owners -- whose devices command the highest price -- began to outnumber those with the older iPhone 4 or iPhone 4S. "The early adopters are doing the math," said Trachsel.

Nor did the buyback firms fear new plans put in place this summer by several U.S. mobile carriers, including AT&T (dubbed Edge), T-Mobile (Jump) and Verizon (Edge), that let customers switch smartphones as frequently as every six months. As part of those plans, customers trade in their current device for a new model.

"The way those plans are structured, they appeal to a subset of smartphone owners," said Trachsel. "And the financials are not very compelling."

And Trachsel and Scarsella agreed that neither company knew how an anticipated lower-priced iPhone 5C will impact the re-commerce industry. The iPhone 5C, which may cost as little as $330 without a subsidy, is reportedly aimed at emerging markets like China and India, where subsidies are rare and the iPhone is priced far above its competitors.

Most of the iPhones that Gazelle and NextWorth purchase are sold in developing countries.

"We won't know how [the iPhone 5C] impacts re-commerce until it has been out there for a while," said Scarsella. "But by this time next year we should have some really good insight."

Scarsella didn't sound worried about the iPhone 5C cutting into the market for used iPhone, calling the demand "insatiable."

Trachsel expects the iPhone 5C to be a stunted version of the full-priced iPhone, a stance contrary to that of most analysts, who believe it will be identical to the current iPhone 5 but encased in plastic rather than aluminum.

"It's really hard to know its impact without knowing what the device will have," Trachsel said. "I don't think re-commerce is in any grave danger, but we'll watch it. It all depends on how much they pack into the iPhone 5C and how much demand there will be for what might be an inferior product."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, or subscribe to Gregg's RSS feed . His email address is gkeizer@ix.netcom.com.

Read more about smartphones in Computerworld's Smartphones Topic Center.

This story, "iPhone buyback firms unruffled by Apple's trade-in plans" was originally published by Computerworld.

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